California’s push to make aggregated distributed energy resources into transmission grid market players is the most developed in the country. But it’s still about a year from going live in a big way.

It’s also facing some key challenges, like getting approval -- or at least “concurrence” -- from the utilities that run the distribution grids where these newly minted DER providers will carry out their megawatt-scale energy shifting acts.

And then there’s the question of whether distributed energy resources (DERs) will be worth more at wholesale than they are under California’s new distribution grid values -- or whether those values can be stacked together.

All of this uncertainty hasn’t stopped companies from applying for the job. Lorenzo Kristov, market and infrastructure principal at state grid operator CAISO, said at last week's California’s Distributed Energy Future 2017 conference in San Francisco that several companies have already submitted applications to become DER providers under the new program. “I’d imagine they’re in the process of developing their actual resources they’ll be providing in the market,” he said.

Kristov didn’t name the companies involved. But a November 2016 report from CAISO to the Federal Energy Regulatory Commission does name four companies that have signed up for a “pro forma distributed energy resource provider agreement” -- the first step in becoming a distributed energy resource provider, or DERP.

One was utility San Diego Gas & Electric, which proposed a 3- to 4-megawatt aggregation of energy storage sites across its territory -- the largest of the four proposed projects. SDG&E proposed a 2018 start date.

Another was Apparent Energy, which said it was ready to launch in early 2017, working with Silicon Valley Power and Palo Alto’s municipal utility on two aggregations of 1 to 1.5 megawatts each. But a December report from Silicon Valley Power noted that Apparent “could not make a business case in SVP territory” at that time, although “as DG resources potentially grow and as the CAISO markets evolve, there could be potential.”

A third was Galt Power, a participant in other North American transmission markets, which proposed working with energy developer Customized Energy Solutions. The companies are “in discussions with several entities seeking to aggregate renewables and small-scale storage.”

Finally, there was Olivine, a scheduling coordinator that serves as an intermediary between CAISO and DER providers, which is “working with a number of clients, including municipalities, community choice aggregators, and resource owners.” Because every would-be DERP has to work through a scheduling coordinator, it’s hard to know which of Olivine’s clients might be involved in the company’s application.

Olivine is also involved in the Demand Response Auction Mechanism, or DRAM, pilot program, which has so far put together more than 100 megawatts of DER resources from companies including Stem, Advanced Microgrid Solutions, EnergyHub, Ohmconnect and AutoGrid. CAISO’s report notes that Olivine is “considering the addition of distributed energy resources and the potential conversion of storage and electric vehicle assets currently participating as demand response resources,” indicating that some of these DRAM clients could also be eyeing their potential as DERPs.

CAISO just published its “new resource implementation process” on its DERP website this week, opening up the potential for more applications.

California grid-DER integration: A long path from concept to reality

Last summer, after years of effort, CAISO got federal approval for its new distributed energy resource provider tariff. It allows for DERPs to submit aggregations of between 500 kilowatts and 10 megawatts that can meet the requirements for its day-ahead and hourly energy markets, or its faster-responding ancillary services markets.

Since then, California’s efforts have helped jump-start bigger changes. In October, FERC issued a ruling that opened the option of aggregated DERs for the rest of the country’s independent system operators (ISOs) or regional transmission organizations (RTOs), opening a vast new potential market.

That’s only potential, though. It can take years for FERC orders like these to make their way through grid operator technical working groups and stakeholder proceedings and into real-world markets. No other region is as far along as California right now, although mid-Atlantic grid operator PJM has opened a discussion, or a “problem statement” in its terminology, and Texas grid operator ERCOT, which is outside FERC’s jurisdiction, has held an on-again, off-again discussion on the subject.

Applying for DERP status is only the first step in a multi-stage process, Kristov noted. CAISO’s recently released “new resource implementation process” includes a 43-item list of requirements involving interconnection, metering, telemetry, topology and other such technical details. Once those are completed, it will take months more to process and verify each aggregation, he said.

In the meantime, CAISO is busy working with the California Public Utilities Commission and utilities in the state on another challenge -- getting more visibility between transmission and distribution grids.

“The ISO only sees the system down to the transmission-distribution interface,” or the transmission substations that connect the state’s high-voltage grid with the distribution grid. “Even if we have telemetry to some of the devices, we don’t have the distribution system data," said Kristov.

The gaps between transmission- and distribution-level values and capabilities

That can cause problems in two directions, Kristov said. For the distribution utility, there’s the prospect of half a megawatt or more of load suddenly dropping away or coming on-line under CAISO dispatch, causing local grid instability. FERC’s order this fall specified that distribution utilities have the right to review the composition of these DER aggregations. To solve that problem right now, CAISO requires each DERP to “obtain concurrence from the applicable utility distribution company (UDC) or metered sub-system (MSS)” to alleviate concerns, involving a utility-by-utility process that takes up to 30 business days.

In the other direction, CAISO needs to worry about distribution grid topologies, or states of network interconnection, he said. California’s transmission system is pretty stable topologically -- it doesn’t see major switches and shifts in the flow of power. “But in distribution, they’re having changes in topology all the time, they’re switching circuits,” he said, and “that can affect whether a DER can respond to a dispatch or not.”

Both of these problems could be addressed by better visibility and data-sharing between utilities and CAISO, he noted. “The ISO could provide those dispatch instructions to the distribution company, and the distribution company could know...‘Oh, that’s where it is; it’s going to happen 5 minutes from now -- will that cause a problem for us?’”

California’s utilities are arguably ahead of many in the country in terms of visibility into their distribution grids, with widely deployed smart meters and multiple pilot projects integrating DERs into the software and control systems that run their low-voltage networks. But they’ve still got a long way to go, as evidenced by the multibillion-dollar grid modernization investments utilities are asking the CPUC to approve for the coming years.

The state’s big investor-owned utilities are also mapping out their distribution grids to find the value of DERs as part of their multibillion-dollar annual capital investment budgets, under the CPUC’s distribution resources plan and integration of distributed energy resources proceedings. This process will create valuable data for CAISO as well as the utilities, Kristov noted.

Indeed, the value of DERs for local grid needs may well exceed the value they can realize on wholesale energy and ancillary services markets, he said. “DER substituting for distribution assets is probably more promising than DER substituting for transmission assets,” explained Kristov -- an observation backed up by a Lawrence Berkeley National Laboratory analysis of the state’s future energy needs.

At the same time, CAISO does see great value in DERs that can help it manage the "duck curve" imbalances that solar power is causing on California’s grid, he said. “That problem can be solved very well at the distribution level.” But “not all the value has been clearly monetized in terms of services to be able to do that.”